Interpretations of Probability Expressions A Comparison Between StandardSetters and Accountants

• Published in: Pacific accounting review 1999-01, Vol.11 (1/2), p.241-254
• Main Authors: Laswad, Fawzi, Mak, Y.T.
• Format: Article
• Language: English
• ISSN: 0114-0582
• DOI: 10.1108/eb037945

This study extends the study by Laswad and Mak 1997 on the interpretation of probability expressions used in accounting standards by New Zealand standard setters, by comparing the interpretations of standardsetters with practicing accountants. The results generally show that the ranking of phrases of probability expressions by accountants is similar to standardsetters. Further, similar to standardsetters, accountants interpret many different probability expressions used in accounting standards as if they denote similar probability levels. This suggests that some probability expressions are redundant. The reduction of probability expressions may facilitate greater consistency in the application of accounting standards and consequently greater comparability in financial reporting. The results also indicate that, similar to standardsetters, there is considerable disagreement among accountants in the interpretation of probability expressions, which suggest that to enhance comparability in financial reporting, guidance in the interpretation of such phrases is needed.